Real estate

Top 828. Oct 12, 2005 3:59 PM

» Happy_2 - Re: Re: Bush Tax Panel Targets Mortgages

In response to Re: Bush Tax Panel Targets Mortgages posted by lcha:
You said, "..With a 5.5% mortgage you would have to buy at least a $200,000 house to get any benefit even in the early mortgage years.."

In California this is not hard to do.

-- posted by Happy_2

Top 829. Oct 13, 2005 6:11 AM

» lcha - Re: Re: Re: Bush Tax Panel Targets Mortgages

In response to Re: Re: Bush Tax Panel Targets Mortgages posted by Happy_2:

As of 2004 the national median home price was $185,200. Assuming the borrower financed 95% of that price, the resulting mortgage would be $175940. With a 5.5% mortgage the interest in the first year would be around $9675. The standard deduction for federal taxes for this year is $10,000 I believe. The math is not exact but close enough. So the interest deduction is not greater than the standard deduction for the roughly half of Americans that buy houses, not to mention the Americans that DON'T buy houses.

Yes, living in Texas I realize my real estate view is distorted relative to CA or NY residents. But why should I fund, through tax deductions, out of control, bubbly, housing prices elsewhere?

In Texas we pay a reasonable price, relative to income, for homes. We don't have a state income tax BUT, I pay a 4% property tax and 8.25% sales tax. That is enough and if my state can't get by on that income, it should cut spending.

-- posted by lcha

Top 830. Oct 13, 2005 10:28 PM

» Happy_2 - Re: Re: Re: Re: Bush Tax Panel Targets Mortgages

In response to Re: Re: Re: Bush Tax Panel Targets Mortgages posted by lcha:

Personal Itemized deductions include more than just home interest. They include medical, if greater than 7.5% of AGI, all charitable deductions, all taxes paid(this is big in states like Ca. and NY where income tax is huge), finally, investment expenses including margin interest and misc. deds.

-- posted by Happy_2

Top 831. Oct 15, 2005 2:58 AM

» SteveT - Buyers, Beware

By STEVE BERGSMAN

IT'S NOT JUST YOUR OLD COLLEGE ROOMMATE, the one who never held a steady job, who's buying and selling real estate at warp speed. Lured by cheap money and the prospect of rich returns, institutional investors have joined the game, as well. In some markets, big office buildings and apartment communities are changing hands almost as fast as the signs that say "new owner" are nailed to the wall.

The sun may be setting, however, on the days when commercial real estate could be bought and resold for huge profits in split-second timing.

While buyers remain abundant, the steep price increases of recent years have begun to level off, in part because interest rates and capitalization rates -- a key measure of investment returns -- have been rising.

So current buyers could find themselves reaping lower returns in the near term, or holding properties for far longer than they'd expected.

"If you're looking for the short-term flip, you're too late," says Jim Titus, managing director of Realpoint, the research arm of GMAC Institutional Advisors.

"Flipping," which smacks of retail real-estate speculation, is a dirty word among commercial-property types. The preferred term among oh-so-refined institutional investors is "active management," although "hyperactive" might be a better description.

"We have seen tremendous price appreciation over the past few years, so investors are realizing returns much more quickly than anticipated," says Charles Harry, a managing director in Cushman & Wakefield's capital-markets group.

HISTORICALLY, COMMERCIAL PROPERTIES were held for five to 10 years by institutional investors such as pension systems and real-estate investment trusts (REITs). In recent times, however, the average holding period has shrunk to two to five years, notes Greg Vorwaller, president of CB Richard Ellis Investment Properties Group.

[buldings]
Real-estate returns have trumped stock-market returns since the Nasdaq crashed in 2000.

Earlier this year, Heitman LLC, a Chicago real-estate investment-management company, raised $400 million in a closed-end fund to invest in real estate. Maury Tognarelli, Heitman's president and chief executive, expects the investment life of the fund to be around seven years. But he says he won't hesitate to sell the properties sooner if the opportunity arises, a common stance throughout the industry.

The poster child for active management could well be a 185,000-square-foot office building at 485 Fifth Avenue in New York. According to local real-estate records, the property sold in 1995 for about $25 million, or $135 per square foot. It sold again in 2000 for $37.6 million, and again in 2004 for approximately $55.5 million.

Recently, Belfonti Capital Partners and the Carlyle Group purchased the structure, once home to Tommy Hilfiger U.S.A., for $88 million, or $475 per square foot. The buyers plan to convert it into luxury loft condominiums.

GRANTED, MANY COMMERCIAL BUILDINGS haven't seen four ownership changes over the course of the decade, nor such stellar price appreciation. But the rules of the game have changed markedly since 2000, when a precipitous drop in interest rates, and a bursting of the stock market's bubble, laid the foundation for the latest real-estate boom.

Lured by the promise of better returns than busted tech stocks could offer, new groups of investors, including wealthy individuals, syndicates of high-net-worth buyers, private real-estate investment trusts and hedge funds, swarmed into the commercial-property market, bidding up prices across the U.S.

From 2000 through 2004, U.S. stocks, as measured by the Standard & Poor's 500 stock index, suffered a cumulative loss of 17%. Investments in real estate, on the other hand, as measured by the NCREIF Property Index, gained about 10%. (The National Council of Real Estate Investment Fiduciaries tracks real-estate performance for institutional investors.)
Table: Penthouse Prices?1

"Five years ago, if you were going to bid on a $35 million or $40 million apartment building, you were bidding against five to 10 other institutional buyers," says Linwood Thompson, a managing director at Encino, Calif.-based Marcus & Millichap, the nation's largest real-estate investment brokerage firm.

Adds Thompson: "You all had the same time frame and the same yield requirements. It was like being in the same swimming pool, where everyone obeyed the rules. Today, if you're marketing a $60 million apartment building, you have the same 10 institutional buyers, plus a couple of hundred entrepreneurial clients."

The effect of such competition on various asset classes has been bewildering, to say the least. Consider the apartment market: Over the five years ended 2004, the net operating income of U.S. apartment buildings declined an average of 14%, Thompson says. Yet, the average selling price rose 40% over the same span.

In the view of Lloyd Lynford, chief executive officer of Reis, a New York commercial real-estate research company, buyers have become "overly aggressive."

In a Reis study conducted in this year's second quarter comparing cash-flow potential versus transaction prices, the firm calculated that office-building buyers were paying an average premium of 33%, and apartment-building buyers a premium of 25%, over actual value.

Buyers are counting on a rise in rents, which have been relatively flat, to give them a margin of safety. Apartment rents were up an average of 1% in 2002, 1.6% in 2003 and 2.1% in 2004, according to Reis.

Meanwhile, this year's average asking price for office rents -- $24.43 per square foot -- is less than 1999's average of $24.51.

TO BE SURE, COMMERCIAL PROPERTY PRICES have eased some this year, but remain expensive by historic measures. According to Real Capital Analytics, a New York-based real-estate research firm, the average per-unit price of mid- and high-rise apartments was $121,439 in the third quarter of 2003. By last year's third quarter that number had risen to $168,981. But, as of this year's third quarter, it had dropped to $144,974.

The office market peaked even earlier, based on Real Capital's figures. In the third quarter of '03, the average per-unit price of a CBD [central business district] office building was $253. Prices fell to $213 as of last year's third quarter, and to $208 as of the quarter just past.

TROPHY BUILDINGS ARE A SEPARATE SPECIES, however, as the recent sale of the Bank of America Center, in San Francisco, illustrates. The center, fabled for its 52-story, black granite tower, was sold to an investment group in 2004 for $879 million, or $489 per square foot.

Less than a year later, the property was put back on the market for a reported $1.25 billion. It was sold in September for $1.05 billion, a local real-estate record, to a group of Hong Kong investors.

Although the sellers didn't get quite what they'd asked for, $1.05 billion was considered a very aggressive bid. Office rents in San Francisco currently fetch an average of $31 per square foot, down from $69 at the end of 2000.

And, while the building is 96% leased, many of those leases are thought to be fairly old, and coming to the end of their terms. When they turn over, they are likely to be renegotiated at lower, not higher rates.

Given recent distortions in the relationship between net operating income and selling prices, some savvy industry insiders are starting to lighten up.

Mitchell Hersh, chief executive officer of Mack-Cali Realty, a New Jersey-based REIT, says his company has been selling into "a frenetic market."

Other REITs, such as Equity Residential Property Trust, have taken the same tack. In 2002, the REIT bought the Isles at Sawgrass, a 368-unit apartment community in Sunrise, Fla., for $26 million. In August, it sold the property for $61.3 million to an investor group.

It's not hard to detect an air of panic about some recent property deals. Says Mack-Cali's Hersh, "There is a sentiment among certain buyers that they don't want to be the last man standing."

STEVE BERGSMAN, a free-lance journalist, writes frequently about real estate.

E-mail comments to editors@barrons.com
URL for this article:
http://online.barrons.com/article/SB1128...

-- posted by SteveT

Top 832. Oct 15, 2005 8:06 PM

» Laangaan - old real estate wives tales

.
I was in Alexandria,right across the river from the capital place. Kinda cramped last time I was there. People piled in on top of one another. Little tiny houses. Jobs way up, population growing. I was told the real estate people call this condition "buildout". All built up with no more land left. So the real estate meanies charge more for whatever is left; a small pile of bricks with 2 BR, or a wigwam of some sort. Way up there in price they say.

But this time around I noticed something different.

Telltale stretch marks near the river and some other places.

The city fathers are expanding the land.To make much more land available for development. To keep prices under control, you see. Smart!

You see the real estate slickers have been trying like hell to convince us that a given piece of land will only hold so much building, and then we have "buildout". Naturally prices would then go up, right? After all the land is finite ain't it? They ain't makin no more etc etc...

Not so fast. If certain powers in the jurisdiction created more land, it would stifle the price growth which otherwise would have occurred naturally from scarceness of space. But land is not necessarily like other tangible things. Under control of the right people it can be made to expand, rendering the notion of "buildout"
Bogus.

So you see prices will be just fine for buyers , thank you very much.

The land will expand to accommodate the growing population. So stake yer claim and pitch yer tent.

Prices will be just fine.

Some people wont tell you these things. But I don't mind a bit.

-- posted by Laangaan

Top 833. Oct 16, 2005 10:11 AM

» Jas_Jain - Re: Map of Homes for Sale Near You

In response to Map of Homes for Sale Near You posted by Kirk:

--

"Hardly any for sale near me... yet"

You are as good at picking the place to buy a home as you are at picking tech Scams, Kirk.

Although, no signs for sale may be a negative indicator too. Any healthy market should have a reasonable level of inventory for sale. No? It is entirely possible that the neighborhood is over-priced.

Jas

-- posted by Jas_Jain

http://www.sfgate.com/cgi-bin/article.cg...

Top 834. Oct 16, 2005 1:39 PM

» unklstuart - Article from the 10/16/05 SF Chronicle Real Estate section

Article from the 10/16/05 SF Chronicle Real Estate section

MARKET TILTING TOWARD NORMAL
Those heady days of traffic jams outside open houses are gone. Inventory is increasing, and buyers have a better chance
Kelly Zito, Chronicle Staff Writer

Sunday, October 16, 2005

To sell a Novato town home that's been on the market for nearly half a year, real estate agent Peter Nielsen lowered the price $50,000 and is kicking in his 1986 Jaguar.

After a buyer for a SoMa condo failed to materialize in two months, agent David Jones and the seller decided to yank the listing and upgrade the appliances and lighting fixtures.

Earlier this month, Nick Falconio printed T-shirts for the half-dozen agents staffing a flashy open-home tour in San Francisco's Sunnyside neighborhood.

Amid a perceptible cooling in the housing market and a jump in the number of homes for sale, Bay Area real estate agents find they must do something they haven't done in years: sell.

"In the last few years, you put something on the market for two weeks, and you didn't have to do anything," said Falconio, an associate manager at Prudential in San Francisco. "Now you have to work for it a little bit more."

And how. Falconio's "mega" open house not only ran six hours but included 95 personal tours, invitations to roughly 250 neighbors, a catered lunch and about 40 signs within a six-block radius. The custom T-shirts showed a picture of the 1940s bungalow and read "Come to the Sunnyside of the street."

Such marketing extravaganzas are becoming more frequent as the inventory of homes for sale in San Francisco reaches its highest level in three years, according to a report by Prudential real estate agent Frank Bodnar. The supply of condos offered through the Multiple Listing Service surged 57 percent between Oct. 1, 2004, and Oct. 1, 2005, while single-family home listings have soared 35 percent.

Sales, meanwhile, have slumped 26 percent and 14 percent for single-family homes and condos, respectively, between September 2004 and September 2005.

In Marin County, a similar report by Nielsen, an agent at ReMax, found prices have dipped 3 percent for single-family homes between the second and third quarters of this year.

Of course, the median for a detached home in Marin County rose 11 percent above the year-ago level to $953,500, according to Neilsen's research, making the county one of the most expensive in the nation.

Furthermore, single-family homes in particularly desirable areas around the region such as Noe Valley, Oakland's Montclair district and Palo Alto virtually sell themselves for well above the asking price, suggesting the broader market isn't in freefall.

But neither does the market appear to be in the midst of a typical seasonal slowdown.

As the nearly decade-long housing boom appears to be losing steam, the balance of power is shifting noticeably toward buyers, according to agents, often among the first to see a turn in the market. Other reports based on federal data or local recorder-assessor filings tend to lag the market by a few months.

At a weekly meeting of about 50 Prudential San Francisco sales agents last week at Fort Mason, several said they had been involved in transactions in the last month in which a property had changed hands at or -- gasp -- below the asking price. Later in the hour, some agents even questioned the long-practiced strategy of listing a property far below the desired sale price, much as shark hunters throw bloody chum in the water to incite a feeding frenzy.

"We need to start marketing properties at listing prices (sellers) are willing to accept," said agent Roger Landry.

Sellers also must be prepared to do what was unheard of during the height of the frenzy -- invest money in a property to boost its profile.

Jones advertised his client's one-bedroom SoMa condo for $649,000 for 70 days before deciding last week to take it off the market. The owner, who had already spent about $14,000 in upgrades, plans on pouring roughly $5,000 more into the condo to help set it apart from the 29 comparable units on the market within four blocks.

"Six months ago, it would have sold like that," Jones said.

Nielsen, who originally listed the 1,700 square-foot Novato townhouse for $799,000 before lowering it to $749,000, thinks rising interest rates and a sense of price fatigue are finally starting to take some starch out of the market. This week, the average rate for a 30-year fixed mortgage hit 6.03 percent -- the first time it has been above 6 percent since March, according to mortgage titan Freddie Mac.

"Appreciation has been in the double digits for so long that at some point it just outstrips the ability for the vast majority of people to afford these homes," Nielsen said, noting that if the buyers of the Novato condo don't want his "neo-classic" Jaguar XJ6, they will get a credit for $2,500. "Earning power isn't keeping up, and it takes some time to correct."

All of this may come as a surprise to sellers, who just six months ago, watched as their neighbors waded through sheaves of multiple offers and swamped open houses.

"Sellers are sometimes the last to know," said Bodnar. "They think they're still going to get 20 percent or 30 percent over (the asking price), but now they may find that offer dates are coming and going with no offers."

Many new agents who flocked into the industry after the technology crash face the first "normal" market they've ever seen, Bodnar added.

The picture is similar in the new home market. One year ago, builder Standard Pacific sold out each batch of new homes on the day they were released. Today, between 30 and 60 percent sell out immediately.

"We knew it was going to flatten out," said Douglas Krah, regional president of Standard Pacific Homes of Northern California. "Buyers are tired of standing in line, overbidding, filling out loan (documents) and all the things associated with buying a house."

At the same time, sellers of new and existing homes must work harder to land buyers, however, prices generally remain on an upswing, and sales are not too far below record territory. In other words, any housing bubble isn't bursting but simply leaking some air so far.

Richard Calhoun, who tracks home sales in San Mateo, Santa Clara, Santa Cruz and Monterey counties, said the median days on market -- a measure of how quickly homes are selling -- stands at 21 days.

"The market has slowed, but not that much," said Calhoun, owner of Creekside Realty in San Jose. "I don't know anyone who's complaining about homes selling in three weeks."

Although sales of houses and condos across the entire Bay Area fell 4 percent on a year-over-year basis in August, the median price for a detached home in the nine-county region vaulted 19 percent to $651,000, according to DataQuick, a real estate information firm based in La Jolla.

And in some neighborhoods, prices appear to be rising at an even faster clip. A two-bedroom, two-bath home on Evelyn Way in San Francisco's Miraloma Park neighborhood, for example, was snapped up in three days earlier this month. It sold for $850,000 -- $75,000 above its list price.

"There may be more to choose from, but we still have a large supply of buyers," said Prudential agent Lee Denton. "San Francisco has limited space, and because so many people want to live here, our market is different."

Nevertheless, even a deceleration doesn't open the door wide enough for many would-be buyers. Newlyweds Windy St. George and Charles Challey have been casually shopping for a home in the $350,000 to $400,000 range since April. The San Pablo couple -- both work as office assistants in a real estate office -- believe the market has ebbed slightly.

Still, they figure they would have to pay about $2,500 a month in mortgage, taxes and insurance to afford a lower-end property here. Currently, their rent runs $1,000 per month. Instead, they're considering moving to Flagstaff, Ariz., or to the Mount Shasta area, where homes sell for less than $200,000.

"We don't really want to leave," said St. George, 28. "But I'd really like to have kids before I'm 40. I grew up in an apartment, and I don't want to do that to another generation."

E-mail Kelly Zito at kzito@sfchronicle.com.

-- posted by unklstuart

Top 835. Oct 16, 2005 2:53 PM

» Happy_2 - Re: Re: Re: Map of Homes for Sale Near You

In response to Re: Re: Map of Homes for Sale Near You posted by Kirk:

Being a native of the Salinas area, and owning agricultural land in the area, I can tell you the shortage of land is due to one thing. The Monterey County Master Plan does not allow for housing on land zoned agricultural. The Board of Supervisors is very restrictive in allowing any land, let alone lettuce land, to go from agricultural to residential.

Just like the Bay Area, 90% of the land is designated open-space or agricultural.

-- posted by Happy_2

Top 836. Oct 16, 2005 5:58 PM

» Normxxx - Re: San Jose Mercury Top Indicator

In response to San Jose Mercury Top Indicator posted by Kirk:

A first sign of a souring market is a jump in the advertising budget.

Ask lcha how the housing market reacted in Texas (and I can vouch for Colorodo) in the mid '80s when the price of oil fell through the floor.

-- posted by Normxxx